WASHINGTON, D.C. -- Canada is in much better financial shape than its industrialized counterparts but more could be done to shore up Canada’s economy and protect Canadian investors, said Canada’s finance minister.
In a telephone interview Friday from the International Monetary Fund (IMF) meetings he is attending, Jim Flaherty, who is also MP for Whitby-Oshawa, said Canada is the only country of the G7 nations that has managed to cut taxes to corporations and taxpayers (including the GST) and cut program spending while managing a budget surplus.
“We saw the slowdown coming,” he said. These October 2007 cuts provided significant stimulus in the economy amounting to 1.4 per cent of the GDP.
“This is a bigger stimulus than that in the United States.”
There is still domestic consumer confidence as evidenced by strong auto sales in Canada compared to weaker sales in the United States, he said.
But the outlook is not as rosy as many would like. The IMF said Canada’s economy would expand by 1.3 per cent this year, down from its January forecast of 1.8 per cent. The prediction for Canadian growth in 2009 is 1.9 per cent. Both projections were well below the IMF’s forecasts for world growth of 3.7 per cent this year and 3.8 per cent in 2009.
The IMF meetings are geared to getting industrialized finance heads and central banks to try to agree on how to keep the American credit crisis from causing a global recession.
“The IMF said this week they think the U.S. is in recession and that affects the world,” said Mr. Flaherty.
But Canada’s “economic fundamentals are putting us in better shape” than the United States, he said.
The housing situation in Canada is nothing like that in the U.S. with their subprime rate lending meltdown that caused many lending institutions to foreclose on mortgages over the past several months. That had a negative ripple effect on economies around the world.
Mr. Flaherty said banks and other private lending institutions in Canada should be part of the solution to alleviate the credit crisis. Stronger regulation of the financial markets, for example, would lessen the risk of a future crisis while protecting investors, including those with pension funds. He also wants freer trade of securities with the United States and mutual recognition of securities “to make it easier to invest around the world.”
But this week Canada lost out on a key opportunity to form a regulatory alliance with the U.S. because it does not have a single regulator.
“Canada has (several) provincial and territorial securities commissions,” he said, adding that some provinces want this to continue. “That is a major detriment. It has hurt us and is one reason (the U.S. chose to look at an alliance with Australia).
The IMF talks include trade heads from the G7 nations which include Canada, the U.S., Britain, France, Germany, Italy and Japan.
With files from Torstar News Service